The purpose of this bill is to overhaul the Luxembourg accounting law applicable to companies. This reform aims to modernize Luxembourg accounting law by making it more readable and intelligible, better structured and correctly articulated.
The bill n°8286 (hereinafter the "Bill") regarding the accounting, annual financial statements and consolidated financial statements of companies as well as the reports relating thereto and abolishing the function of supervisory auditor (commissaire) in company law was submitted to the Chamber of Deputies (Chambres des Députés) on 28 July 2023. The main aim of this ambitious Bill is to reorganize the Luxembourg's accounting law into a single law but also to introduce an audit requirement for "large holding companies", to modernize the accounting regime for dissolved companies and companies in liquidation and to abolish the function of supervisory auditor (commissaire) in company law.
A) Reorganization and Clarification This Bill cannot be discussed without mentioning its main point of reform, which is to regroup the common accounting law texts, which are currently found notably in the Code de Commerce, the amended law of 10 August 1915 on commercial companies, the amended law of 19 December 2002 relating to the register of commerce and companies as well as in several sectorial texts such as the banking accounting law of 1992 or the insurance accounting law of 1994, in a single law. Another Bill's objective is the adoption of a bottom-up structure called "bottom-up approach" which would replace the current structure "top-down". In fact, the current structure sets out as the general regime applicable to large companies with exceptions for small and medium-sized enterprises ("SME"). But in Luxembourg, the vast majority of companies are SME (97%), so the current structure is not adapted to the situation. The "bottom up" approach would reverse the current organization by setting the general regime applicable to SME and providing a derogation regime for large companies, while including "micro-enterprises". For the latter, only an abbreviated balance sheet and profit and loss account would be filed, but these could remain confidential and only be accessible to public authorities (exempting them from legal control by an approved statutory auditor (réviseur d'entreprises agréé) and from producing the annex to the annual accounts and the management report). Finally, a new index method could be introduced for the single accounting law, which has been structured into titles, chapters and sections. Thus, the hundreds digit would correspond to the title, the tens digit to the chapter and the units digit to the section. These figures will be followed by a hyphen and then by the number corresponding to the article. For example, the article 321-2 corresponds to article 2 of title 3, chapter 2, section 1. This new method would make easier the insertion of legislative amendments, while at the same time allowing, an efficient identification of legal texts, particularly by adding a heading to each article. B) Audit obligation for "large holding companies" The Bill keeps holding companies in the category of small companies (by virtue of the fact that the turnover does not include financial income) but subjects large holding companies – defined as those for which the balance sheet total exceeds EUR 500 million, to a legal control of their annual accounts by an approved statutory auditor (réviseur d'entreprises agréé). C) Modernization of the accounting regime for dissolved companies and companies in liquidation At each annual closing prior to the close of the liquidation, companies in liquidation will have the obligation to draw up interim annual financial statements of liquidation (balance sheet, profit and loss account and annex) which will now be presented to the shareholders' meeting (but not approved by it) within 6 months of the end of the financial year or of the anniversary of the start of the liquidation and will be filed with the RCS or even published for corporate forms subject to accounting disclosure. At the close of the liquidation, as it is already the case, the closing financial statements of the liquidation showing the settlement of the liabilities through the realization of assets during the entire liquidation period should be produced and now filed with the RCS and published in the RESA, depending on the legal form of the company. The intervention of one or more auditors to the liquidation is still required, it being understood that it is now explicitly stated that these latter may be assisted in their task by a chartered accountant (expert-comptable) or by an approved statutory auditor (réviseur d'entreprises agréé). D) Abrogation of the position of supervisory auditor in company law The Bill aims to abolish the function of supervisory auditor (commissaire) (as a supervisory body responsible, notably, for controlling the accounting documents of public limited liabilities companies and distinct from the approved statutory auditor (réviseur d'entreprises agréé)) which currently only applies to some small companies. It will remain possible, nevertheless, for partners and shareholders of small companies to request a contractual control of their accounts by an approved statutory auditor (réviseur d'entreprises agréé) or even by a chartered accountant (expert-comptable). E)Conclusion This Bill is ambitious and other points, which would also merit particular analysis, are also subject to amendment, such as :
- The partial exercise of the "micro-enterprises" option and the raising of the thresholds for small businesses ;
- The extension of the scope of the single accounting law to non-commercial companies such as civil companies and collective investment funds (fonds commun de placement) ;
- Maintaining and clarifying IFRS options.
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